Business torrents

Europe’s services industries contracted at a record pace in February, pushing the economy deeper into its worst recession in more than a decade.

A gauge of activity fell to 39.2 from 42.2 in January. The index is based on a survey of purchasing managers by Markit Economics and a reading below 50 indicates contraction. Manufacturing also shrank at a record pace, according to a March 2 report.

Service companies ranging from banks to travel operators are cutting jobs and spending to counter a drop in demand. European unemployment rose in January to the highest in more than two years and economic confidence fell to a record low last month. Commerzbank AG Chief Executive Officer Martin Blessing said this week that the bank can’t rule out the need for more state aid.

“Europe’s industrial sector is worsening at a faster-than- expected pace and that’s showing an impact on services industries,” said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. The European Central Bank “will continue to lower interest rates beyond March.”

The ECB will probably lower its main lending rate by 50 basis points to 1.5 percent when council members meet in Frankfurt tomorrow, according to all 55 economists in a Bloomberg News survey new car loans. The central bank has cut the key rate by 225 basis points since early October.

Job Cuts

The services index for February was revised up from an initial estimate of 38.9 published on Feb. 20. Still, companies cut jobs at a record pace as new business and confidence declined, Markit said.

Europe’s economy contracted the most in at least 13 years in the fourth quarter. Air France-KLM Group, Europe’s biggest airline, said last month it will cut as many as 2,000 jobs after lower ticket revenue and dwindling cargo volumes pushed it to a loss in the last three months of 2008.

The services measures for the euro area’s three largest economies all dropped to record lows last month, according to national reports, also published today. The gauge for Germany fell to 41.3 from 45.2 in January. Italy’s dropped to 37.9 from 41.1 and the French index declined to 40.2 from 42.6.

The measure of the euro-area manufacturing industry fell to 33.5 in February from 34.4 in January. The composite index of both sectors fell to 36.2 from 38.3.

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